>> this is n.b.r. >> tom: good evening. i'm tom hudson. congress calls two chinese companies national security threats, warning their technology equipment could be used for spying. >> susie: i'm susie gharib. it's that time of year again, earnings season, we look at what wall street's expecting from third quarter results. >> tom: and speaking of seasons, it's already looking a lot like christmas for the nation's retailers. this year could be the best ever for online holiday shopping. >> susie: that and more tonight on "n.b.r."! >> tom: two of china's top telecommunications companies are

a threat to u.s. national security. that's the conclusion of the u.s. house intelligence committee after a year-long investigation into emerging technology giants z.t.e. and huawei. huawei says the report relies on rumors and speculation, and the company warns a trade battle could cost the jobs of thousands of workers in the united states. but, as darren gersh reports, there is growing bipartisan agreement that this is the right time to get tough on chinese cyber-theft. >> reporter: in unusually blunt language the bipartisan leadership of the house committee warned u.s. companies not to buy their broadband networking equipment from z.t.e. and huawei. >> our advice to the private sector is this: your obligation is to consider larger data protection and national security implications of your business decisions and we would not advise doing business with these two companies. >> reporter: washington has become increasingly alarmed by cyber-security threats believed to have been launched from china.

cyber theft of american trade secrets is estimated to cost hundreds of billions of dollars a year. >> if huawei wants to do business in the united states, then they've got to tell their government to stop cyber attacking the united states. >> reporter: huawei aggressively pushed back. the company says the intelligence committee provided no clear evidence of wrong doing and it dismissed the report as politically motivated. a spokesman for huawei says the company is owned by its employees and its work around the world is trusted and proven. >> our procurements from us companies totaled $6.6 billion. that's tens of thousands of jobs. these recommendations put at risk american jobs. >> reporter: huawei appears to operate as a purely commercial enterprise, but it is hard to sort out who owns the company and how much of it. the intelligence committee report concludes some chinese telecomm equipment secretly transmitted information back to china. that's what concerns u.s. cyber-

security experts. they fear the chinese government could use huawei's technology to access sensitive information. >> i think it is a legitimate concern. now the question is how much that concern is being used in the u.s. to block a much larger range of investments, because there are many u.s. industries that would like not to have competition from china. >> reporter: much of the intelligence committee's report is classified, but the committee chairman says he is referring a criminal bribery charge to the justice department, but he would not say which firm was involved. >> it's the kind of case i wished someone handed me as a young f.b.i. agent. >> reporter: today's report is a major setback for z.t.e. and huawei's expansion plans in the united states, a critical market for any telecom equipment maker. darren gersh, "n.b.r.," washington. >> reporter: i'm diane eastabrook in aurora illinois. still ahead, the help wanted sign is out at dyson. >> susie: on wall street today, the u.s. bond market was closed

for the columbus day holiday, but stocks were trading. the major averages were in the red as investors brace for the worst earnings season in three years. the flood of third quarter results kicks off tomorrow with dow component alcoa reporting its sultaftethe be. ahead of that, the dow fell 26 points, the nasdaq lost 23, the s&p down five points. joining us now to talk more about quarterly earnings, and the outlook for the markets: scott wren, senior equity strategist at wells fargo advisors. hi, scott, i want to start off by getting your take on quarterly earnings. looking here on this graph about what the forecast had been calling for is a drop of 2.4% in third quarter earnings year-over-year. it will be the first decline in 11 quarters. and over the last couple of weeks we have he been getting a steady stream of earnings warnings. so scott, will the numbers really be that bad? >> well, sus yeaux, you know, they could very easily be

that bad. for me we're expecting more srx flat up 2%. somewhere in there. but really versus that consensus, you're not much different. so i think you know we're not climbing out of the hole any more. we don't have easy comparisons. you're at the point of the economic cycle where you know earnings comparisons are tougher and we're in a very slow economy. so i think that in this particular third-quarter earnings period the chance of a good surprise, a meaningful good surprise or a meaningful disappointment, it's pretty low. the street expects poor earnings comparison. that is what we're going to get. whether you are a couple percent decline or a couple percent gain. it's really not that much different. so it's looking ahead. remember earnings are a trailing indicator. >> so are we going to get a surprise or a disappointment you think from alcoa. everybody looks at this as setting thtone for trading as you mentioned. it will be the first dow component to report. it also when you look at the

company, it has businesses in autos, aerospace, packaging, construction, so it is kind of a bellwether for the economy. what will those alcoa earnings tell us. >> well, alcoa reports first all the time, obviously. and i don't think that is a good idea to use that as a bellwether for earnings. think of the sector that alcoa is in. materials are going to have some was comparisons, really, energy and materials are going to be the two worst comparisons. so you know, alcoa could very well have a disappointing surprisingly disappointing quarter. but i think it's a mistake to use that as a bellwether. i like to move really, this first week of earnings where you know you don't have that many companies report, give me a couple weeks worth of earnings where i can see every sector represented. you know what the economic environment is here in the states and globally. so you just cannot have high expectations. and if you have a good surprise, let's say overall earnings rather than the 2.4% let's say earnings are up, 2 to 5%, you know s that

really a big surprise? i'm not really sure it is. because you are still pretty close to 0. and nobody is expecting the economy to really accelerate over the course of the next couple of quarters. >> susie: all right so, what is going to be driving investment strategy over the coming weeks and months? is it going to be the earnings or is it going to be more of the big economic picture and the elections? >> how does this play out in the markets. >> well, i am a top down guy. so i want to know what the global economy is doing. i want to know what the u.s. economy is doing. in my mind, we're going to be in this modest growth, modest inflation environment for a while. i mean at least through 2013. but i think it is going to be positive. i think the types of sectors that we're looking at are the ones that are really going it to be sensitive to a continuation of that. so we like materials. even though materials haven't done very well i think looking ahead they will. technology, consumer discretionary sector looks good. so we think that the sect leg in the cyclical bull

market started with those october 2011 lows. i've been telling our clients, hey, any opportunity you have whether it's a pullback, valuations are not expensive, you want to make sure that you are invested here because the economy is going to cope growing at least through 2014, i think. i think the market has got some upside here. >> we're going to have to leave there. a lot of good information. thanks so much, scott, scott wren, senior equity strategist at wells fargo advisors. and as we mentioned, alcoa kicks off earnings season tomorrow. the alcoa c.e.o. joins us for an exclusive interview.

>> tom: pump prices have hit a new record in california, climbing to $4.67 a gallon today, according to triple "a", but some cities are experiencing even higher prices. for drivers, the good news is prices are expected to fall, but california remains vulnerable to quick price hikes. refinery and pipeline problems have put the squeeze on supplies and california drivers. >> well its pretty crazy.

>> i think it sucks. big time i mean its terrible" >> the went up pretty high from last week." >> they just jump them up real quick and then it takes forever to get them back down again it is pretty ridiculous. >> tom: today's average price in the state, $4.67 a gallon for regular unleaded. that's $0.50 higher than a week ago. $0.86 higher than the national average. wholesale gas prices fell today after california governor jerry brown yesterday eased the state's gas-blend requirements. the change allows refiners to start processing a less- expensive winter fuel blend today, about three weeks ahead of schedule. california's strict air quality standards require a specific gasoline blend that's not necessary in other states, resulting in only a handful of refiners making it. the price spike came after a power outage at an exxon refinery reduced the state's production. in texas, b.p. announced today it is selling its texas city refinery. marathon petroleum is buying it for $2.5 billion, including the oil supplies on sight. this refinery was the sight of a deadly explosion in 2005, leading to a record fine against b.p. for safety failures. >> susie: those high gasoline prices could keep americans home this holiday season. but, it may not mean holiday stockings will go empty. according to a variety of retail sources, americans plan to do a lot of their shopping in the comfort of their own homes, online. in fact online sales could be a bright spot in an otherwise lackluster retail season. suzanne pratt has the story.

>> reporter: stores like this one are where americans will do the majority of their holiday shopping this year. but, increasingly more and more consumers will let their fingers do the buying, by shopping online. so much so that online sales are expected to account for as much as 15% of total industry sales this christmas. just five years ago that number was a paltry 3%. there are a variety of factors that are likelto draw consumers to computers for shopping this year. but, retail expert tom blishock says first and foremost, it's all about finding the best deal. >> so, no matter if you're buying clothes, if you're buying electronic appliances, or i should say electronics or you're buying food, theres's this tendency to use online shopping on a browsing basis, on a selection basis and on a purchasing basis. >> reporter: an unscientific survey on the streets of manhattan showed holiday shopping plans were a mixed bag.

>> reporter: do you think you're going to do more shopping online? >> that's a brilliant idea. i didn't even think of that. you beat the crowds. you get fast delivery, and then there are the sales. you get online sales that you don't have in the stores. >> probably more this year. i did a little bit last year and it worked out well, got what they wanted, got their sizes hold through shrug. >> reporter: how do you plan to do your shopping this year? >> in stores, i like to see what i'm getting. i don't want to buy it and not like it and then have to take it back, send it back. >> reporter: others plan to use their mouse to shop this year because they find better selection on line, and because it simplifies the shopping experience. and, then there's a relatively new player in the retail world this holiday season that could encourage even more online shopping, and it's probably in your pocket or pocketbook right now.

>> this smartphone becomes our shopping companion. it in fact changes the way shopping is done in the stores, whether you're looking for prices, whether you're looking for features on the products, whether you're looking for capabilities. you'll eventually see a bunch of videos on the smartphone that will show me how to use the product. >> reporter: will they're ever come a time when on-line shopping overtakes shopping in stores? experts say that's unlikely. after all, shopping is still one of america's favorites past times. suzanne pratt, "n.b.r.," new york.

>> susie: many american businesses have put hiring on hold until after the november elections, but not dyson. the company known for its vacuum cleaners and hi-tech fans is on a hiring binge in the u.s. as diane eastabrook repos, dyson believes these new jobs will help generate even bigger sales. >> hi joe, how are you doing today? >> reporter: you could say marco garcia is back in the saddle again. >> what happened to your old belt. >> reporter: garcia recently got a job at this dyson call center near chicago, after losing another customer service job more than a year ago. >> not only am i getting paid what i want i also have the potential to grow and learn a lot of things and not to mention doing what i like to do which is helping people. >> reporter: dyson is one of the few companies hanging out the help wanted sign, at a time when others have put hiring on hold. the company known for its vacuum cleaners recently opened this

new 15,000 square foot call center about 30 miles from chicago. the move to bigger digs paves the way for 200 additional customer experience specialists who help trouble shoot problems. >> put your hand over the machine and press the red power button. >> reporter: and keep in touch with dyson's u.s. customers. >> noticed that you went to our son serve center about two weeks ago and we want to make sure you had a good experience. >> we are looking for people who are passionate about solving problems for the customer. call center experience is a plus, but you can be from retail, all different industries. dyson has also continued to invest in research and development during the economic downturn and actually the expansion of this call center factors into that. >> this is the dc 23. >> reporter: mike daish, president of dyson u.s., says customer feedback has helped the company develop many of its products, including the new cordless dc 44 which is powered by a digital motor. he says those new products have

helped dyson grow sales throughout the economic downturn. >> i think people really considered the money they were going to spend and they bought really good products that worked really well and we found 2008 to 2009 we actually grew significantly and it was actually then that we did some quite unique which was double the size of our sales team. >> reporter: so far dyson has hired about a third of the 200 call center workers it needs, and it could add more if customers keep buying its products diane eastabrook, "n.b.r.," aurora, illinois. >> susie: united health group, is taking a major stake in brazil's biggest health care player. it's paying $4.3 billion for a 90% share of insurer and hospital operator amil. in brazil, only about a quarter of the population have managed care plans. amil, covers more than five million people with medical and dental benefits. united health cited brazil's emerging middle class, growing economy and progressive policies toward managed care, as reasons for doing the deal.

>> tom: the major stock indices limped into the week here on columbus day, and the eve of third quarter corporate earnings season. the s&p 500 was in the red throughout the session. a gauge of economic activity from the organization for economic cooperation and development predicts most major global economies will slow in the coming months. the s&p index fell a fraction. trading volume was light thanks to the holiday. 464 million on the big board. less than 1.2 billion shares traded on the nasdaq. eight the ten major stock sectors were down. the biggest losses were in the technology sector, down 1.1%, and the telecommunications sector, falling 0.7%. apple cast its shadow across technology and the broader market with the company's iphone manufacturer facing labor disputes and worries about iphone supplies. shares fell another 2.2% today. they're down almost 10% of their all time high set less than a month ago. the chinese maker of iphone saw new worker disputes over the weekend, but the maker says it

has not led to work stoppages. separately, certain specialized parts for the iphone may mean less inventories of the phones to keep up with consumereman optical equipment make j.d.s. uniphase led the technology losers, falling 4.2% to its lowest price since mid-august. worries have been growing about telecommunication companies cutting back on their gear purchases. two companies included in the dow jones industrial stock average have a new partnership. wal-mart and american express are teaming up on a pre-paid debit card. it's called blue-bird. customers can load money onto the card using direct deposit, using their smartphone or by reloading it at a wal-mart. shares of wal-mart rose a fraction, but enough to hit a new all-time high. american express stock added 0.4% to fini at a three week hi. this pre-paid debit card deal is the latest financial services strategy for the two companies to attract new customers, and thanks to their sizes, it represents a potential threat to existing pre-paid card providers. two of those came under heavy selling pressure. green dot shares lost a fifth of their value, down 20.2%. green dot has an existing

partnership with wal-mart. net-spend shed 7.4%. netflix stock continues being talked up by investment bank analysts. the latest today was morgan stanley's analyst, who thinks the stock rally has legs, upgrading shares to overweight, wall-street speak for buy. lasteek, ci's analyst repeated its buy recommendation. shares jumped 10.5% as volume more than doubled. this is net-flix's highest price since the company issued an earnings warning in late july. after the close tonight, medical device maker edward lifesciences delivered some bad news. european government's tightening their budgetary belts has hurt sales of its heart valve replacement device, and delays in u.s. sales means it's third quarter revenue will be less than expected. it's a rare disappointment for the company. the stock was down 1% during the regular session, but fell another 15% in extended hours trading, dropping below $92 per share. but drug maker eli lil jumd to a post-recession high, up 5.3% in heavy trading. new data on an experimental alzheimer's drug showed it slowed memory loss in one group of patients.

this same drug had disappointing results in earlier trials. all five of the most actively traded exchange traded products were down. the emerging markets and nasdaq one hundred funds fell the most 0.9%. and that's tonight's "market focus." >> tom: the rumor mill and hype machine are running again around apple. this time over what's been called the ipad mini, even though apple won't confirm any details, incdinghe deve's name. whatever it's called, it's widely expected to be introduced

later this month as a smaller tablet, to better compete on price against google's and amazon's devices. usually a new apple product brings focus on companies providing the parts, but tonight's word on the street is: content. james rogers is with us. james, what does an apple product launch mean for content companies? >> well, it's interesting. typically when apple launches a new product a lot of the attention is focused on the components to see which chip makers are riding the upper wave. but i think there are ways for investors to basically top into the system. and a lot of that could be through certain companies that have really worked out how they will deliver content or basically use the devices for on-line retail. >> tom: apple of course is very successful creating its own ecosystem for content and e-commerce but disney is one of those that has been able to tap into it with its generations of content. the share price up near a new high. what is the opportunity that a new minitablet or the tablet market in general presents for disney.

>> you know, if you look at a companies that's providing a lot of content over mobile devices you really have to look at disney. we are really quick to seize the opportunity with these iphones and these i pads and also mobile devices from other manufactures, looking for interactive books, games, even comic books. one of the things you have to remember with disney is the company is a media empire so it has been signing a lot of content distribution deals with live stream, with the likes of time warner cable, comcast, cablevision and it looks like there will be more of these coming down the pipe. >> what is the model? in other words, is it tritional media delivering an audience to an advertiser or is there something more with this new media model for disney. >> well, i think with disney, you know, that's certainly an element to it but it's really the whole thing. as one investor i was talking to recently said, you know, basically these devices are really opening the door for disney's world and it is the things we talked about but it is also theme park, it's merchandise, it's everything.

i also think that with an ipad minithe smaller size device, it's really going to increase its presence in this market, particularly when we are talking about children starting to use the tabls. >> you've also been writing about price-line.com as a content provider on tablets. not really thought of as a content company but really he merck. what is the opportunity here? >> well, yeah, i mean these are on-line retailer, really. price line is one of the largest on-line travel agents in the world. and i think they are really well-positioned for the mobile boom. the company says that mobiles have really grown part of its business and it has done a lot of work in the space. a mobile version of its web site. it's also enhanced some products to make it easier for customers to buy things. basically make bookings via mobile device. and i think this company's fundamentals are also really, really good. it's not an obvious apple related stock but i do think it is one to look out for. >> how about ownership position. dow own either of them? >> no, none whatsoever. >> it is word on the street. you can find the article at

fbr.com. james rogers with thestreet.com. >> susie: tomorrow on "n.b.r." will earnings be delicious at yum brands, parent of taco bell, pizza hut and k.f.c.? we'll find out where the global fast food giant is seeing strength. and we'll find out what daily deal sites like ling social, are planning for the holidays. >> tom: reporting on business and the economy each night like we do means lots of statistics and numbers. but as tonight's commentary points out, many of these digits represent real decisions made by real people. here's anat shenker-osorio, author of "don't buy it... the trouble with talking nonsense about the economy." >> when was the last time the economy took you out to eat? yeah, me neither. yet to hear us tell it, you'd swear the economy is our crotchety uncle. we say, r example, the economy is suffering. were concerned it is unhealthy and justify not expanding social welfare programs because the economy will get skittish. this language obscures the

actual people who suffer, are made unhealthy or cannot recover because our recovery bill is inadequate to meet national needs. not only on the receiving end does our language not mention people. when we say the unemployment rate rose we imply its like the baromeic pressure: a self- propelled agent that moves at whim. in fact, corporate bosses elect to ship jobs overseas. politicians decide that getting rid of teachers, fire fighters and police officers will somehow magically make the economy happy. and those decisions make more of us unemployed. if we hope to emerge from the wall street made mess that crashed our economy were going to have to name names. a small cabal extracted record wealth impoverishing others. until our language conveys there are actors behind outcomes, there's little hope well end the nefarious practices that got us here. i'm anat shenker-osorio.

>> susie: that's "nightly business report" for monday, october 8. have a great evening everyone, and you too tom. >> tom: goodnight susie, we'll see you online at: www.nbr.com and back here tomorrow night. captioning sponsored by wpbt captiod by media access group at wgbh acss.wgbh.org >> join us anytime at nbr.com. there, you'll find full episodes of the program, complete show transcripts and all the market stats. also follows us on our facebook page at bizrpt. and on twitter @bizrpt.